Asian investors are seeking to rely more on bonds to generate income with nearly half of their portfolios expected to be allocated to the asset class in the coming 12 months, according to a survey by State Street Global Advisors.
Asia Pacific investors are planning to allocate nearly 46 percent of their assets to fixed income over the next 12 months, according to a survey conducted by State Street Global Advisors and sponsored by ABF Pan Asia Bond Index Fund, up from 37 percent a year ago.
By region, Asia ex-Japan will lead in allocations at 28 percent. This is followed by Japan (16 percent), North America (14 percent) and Europe (13 percent).
Six to 10 years was the most popular duration at 46 percent. 71 percent said that the lowest-rated bond they were willing to hold was an A rating.
Market Worries
Despite the favorable view for fixed income, APAC investors still expressed some worries about the broader environment. This includes concerns about recession (37 percent) and inflation (37 percent), geopolitics (35 percent) and currency depreciation (35 percent).
«The recent cycle of interest rate hikes has revitalized the role of bonds in generating income, a function that had diminished during a decade of historically low yields prior to the US Federal Reserve's rate increase in March 2022,» said Marie Tsang, fixed income ETF strategist for Asia Pacific at State Street Global Advisors.
«Apart from home bias, Asia's robust economic backdrop is boosting APAC investor sentiment. The growing allocation to Asia ex-Japan fixed income among APAC investors underscore a growing confidence in the region's fixed income markets as a source of stable returns.»
